When the Latin American debt crisis erupted in the 1980s, global investors shifted their attention to East Asia. Long-term institutional funds are the “spare tyre” that could have softened what came to be known as the 1997 Asian financial crisis (AFC). As my book, From Asian to Global Finance Crisis (2009) revealed, financial crises also had political origins. Essentially, the best and most advanced regulators and policymakers had little appreciation of how interconnected their financial markets had become. But then they discovered quantitative easing (QE), the capacity of central banks to expand their balance sheets and create “magic money”.

Source: The Edge Markets December 17, 2020 05:03 UTC